LONDON -- The United Kingdom is awash in free Internet access.
In September, Dixons, the country's largest TV and stereo retailer, started giving away Internet access through its Freeserve service as a way to jump-start electronic commerce. Since then, 1 million people have signed up -- almost double the number of subscribers America Online has in the United Kingdom.
Now, British Telecom, Rupert Murdoch's powerful News International media empire, and a host of smaller rivals are getting into the act.
In fact, there has been a stampede of new free ISPs in the last month. One of Britain's best-known soccer clubs, Arsenal, is offering free Internet access to its fans, as is Tesco, a leading supermarket chain, and Toys R Us.
Even Richard Branson, the brash record and airline industry billionaire, said on Wednesday that he, too, wants to offer free Internet service. His Virgin Group will invest £50 million to enable all its affiliates -- from Virgin Atlantic airlines, to the Virgin Bride stores -- to pitch their wares online.
Here's the shocking part: All these free British ISPs are thriving -- unlike their counterparts in the United States, which have been filing for bankruptcy with depressing regularity.
Like American freebie ISPs, the British service providers hope to get the bulk of their money from making their customers read a lot of banner ads before they can read their emails. But the British companies have a huge advantage. Thanks to the regulatory setup, British telecom carriers have to share a slice of the revenue from modem dial-up calls with the ISPs.
In effect, the "free" ISPs get about 30 to 90 pence (about 49 cents to US$1.47) from the phone company for each hour a surfer spends online. No such arrangement exists in the United States; free American ISPs live and die by the ad revenue they can scrounge.
It's no surprise, then, that in a country where an hour of even local calling costs a mini-fortune, a free ISP would have enormous appeal.
It also helps that the crop of new ISPs have brand names that every Brit knows, not something geeky like CompuServe. "You used to have to buy Internet access from companies you had never heard of -- now you can get it from your local computer store or supermarket," said Phil Lakelin, a senior analyst at market researcher Analysys.
British Telecom, News International, and United News and Media together own LineOne, an online service with lots of newspaper stories and discussion groups. Industry executives expect the partners to announce soon that they will offer free access starting in March.
British Telecom is offering a separate free service of its own, ClickFree, and the Mirror Group, a major competing newspaper chain, is expected to follow suit.
Because of the proliferation of freebie ISPs, the United Kingdom is becoming a brutal battleground for companies that rely heavily on monthly subscription fees -- companies like small ISPs and America Online. Even with a £6 million (US$9.8 million) ad blitz, AOL's subscriber numbers have only risen 10 percent since October -- a growth rate half of what it managed in 1997.
AOL insisted it will continue charging its customers and that its growth remains "on track." But Lakelin said AOL is coming under increasing pressure to lower prices.
"It has been very clear that Europe has lagged behind the US because of our local call charges," Lakelin said. "Now the price difference is going away, Europe should begin to catch up."
